Bloomberg View

Volkswagen's Lasting Lesson for Labor

February 20, 2014

Illustration by Bloomberg View

In all the comment on the vote against the United Automobile Workers in Chattanooga, something has been missed. Rejecting the union needn’t mean rejecting the idea of effective worker representation. The decision is an opportunity for labor and management to show the auto industry in particular and corporate America in general that they can work more productively together.

By a vote of 712-626, workers at the Volkswagen (VOW:GR) plant said no to the UAW despite the automaker’s tacit support for the union campaign. The UAW complained of outside political interference, but the main problem was the union’s reputation as an adversary of management, implicated in the long decline of the U.S. auto industry. There are better models for industrial relations, tried and proved elsewhere, based on cooperation over confrontation. The vote may advance those prospects in the U.S.

In Germany, works councils take a more collaborative view of a company’s future, and VW is well-suited to export this approach to the U.S. Its deputy chairman is the former head of IG Metall, Germany’s equivalent of the UAW, and labor representatives make up half its supervisory board. The company says it will propose a council for the Chattanooga plant.

Works councils based on the German model cooperate with management over safety standards, scheduling matters, dispute resolution, improvements of production line efficiency, and other shop floor conditions. Separately, IG Metall negotiates over wages and benefits. In Chattanooga, workers could continue to negotiate individually over pay and benefits, and the works council could handle plantwide issues such as training employees on new equipment.

Some labor law experts say VW can’t form a works council without a union first gaining recognition. They say the National Labor Relations Act deems such a committee a “labor organization” that must be put to a worker vote. Actually, the law isn’t clear on the point. But if the courts rule that it does forbid councils without a union’s involvement, the law should be changed.

It can’t be right for U.S. labor law to prevent managers and workers from collaborating to make a production line more efficient. Or to resolve disputes without strikes. Or to keep an assembly line running around the clock. More flexibility and less confrontation, with workers’ views being heard and respected, would help companies succeed in the global marketplace—and their workers could then seek higher wages without putting their jobs at risk.

This hasn’t been the UAW’s approach. In Detroit it negotiated hourly wages, benefits, and everlasting job security that priced the Big Three automakers out of the market. Far from seeking higher productivity, the union resisted it. A generation of managers grew reluctant to push big ideas or make labor-saving changes for fear of provoking the UAW.